This is a Resubmission of an NIH Phase II SBIR Renewal Application directed towards developing and optimizing compounds that are capable of stimulating IRS2 foundation for the treatment of Type II diabetes. If successful, such compounds may also be useful for the treatment of a subset of patients with Type I diabetes as well. The overall goal of this proposal is to engage in lead optimization studies of new molecular entities already identified by HPRL scientists that activate the IRS2-branch of the insulin signal transduction cascade in mammalian cells. The NIH SBIR funding support will be used to focus research at Housey Pharmaceutical Research Laboratories (hereinafter HPRL) to further develop for future commercialization initial discoveries made in the laboratory of Dr. Morris White at the Children's Hospital of Boston, Harvard Medical School, and investigators at the Joslin Diabetes Center. These discoveries have been licensed to HPRL for therapeutic applications. Compounds that activate the IRS2-branch of the insulin-mediated signal transduction cascade have been identified by HPRL as a result of a high throughput screen (HTS) using a target-protein specific cell-based assay system. A subset of these compounds exhibit substantial ability to stimulate cell growth in an IRS2- specific manner. A selected group of such compounds will undergo testing in rodent and human 2-cells together with both in-vitro and in-vivo lead optimization studies in mice. Following successful completion of these studies, a small number of novel, lead-optimized new molecular entities should emerge which may be suitable for advancement into formal preclinical investigational new drug (IND) studies for the treatment of patients with Type II diabetes. HPRL is a fully functional chemical and biological research laboratory that is equipped for modern molecular and cell biological studies, including high throughput screening. Support through the SBIR Phase II Renewal Grant mechanism provides the opportunity to utilize the infrastructure at HPRL for novel and creative projects at the cutting edge of drug discovery and design. Since diabetes is a major disease of substantial proportions world-wide, pharmaceutical products and licensable technologies developed by HPRL will have substantial market opportunities.